When Advanced Micro Devices (AMD) reports third-quarter earnings after market close on Wednesday, Oct. 24. The stock has had an incredible rally over the past few years that it has continued to build upon in 2018. So far this year, AMD is up just over 128% ahead of today’s report.

A lot of analysts have been bullish on the stock and AMD has received a number of upgrades in recent months as the company has exhibited progress on its turnaround. Back in 2015, the stock was trading as low as $1.61 and, judging by the headlines from then, there were quite a few people that thought the chipmaker would be bankrupt by now.

Instead, a steady stream of new product launches and a strong backdrop for graphics card and computer chip demand helped AMD achieve its highest net income in seven years when it reported Q2 2018 results.

For Q3, AMD is expected to report adjusted EPS of $0.13 on revenue of $1.7 billion, according to third-party consensus analyst estimates. Analyst estimates are pretty much in line with AMD’s guidance that calls for $1.7 billion in sales, plus or minus $50 million. In the same quarter last year, adjusted EPS came in at $0.10 on revenue of $1.64 billion.

As its largest segment, the company’s computing and graphics segment is likely to be the primary focus among analysts and investors. When AMD last reported, revenue in this segment jumped 64% year over year to $1.09 billion, which management attributed to strength in its Radeon product line as well as continued growth in the Ryzen processor line. Management did say it was seeing some lumpiness in sales due to lower demand for GPUs in the blockchain market.

In Q2, the company’s smaller segment, enterprise, embedded and semi-custom, was up 37% year over year to $670 million in revenue in Q2. Both semi-custom sales and the newer line of EPYC data center processors were the two main drivers of this growth according to the company.

Another area where investors might be looking for updates are future product plans. In the first half of 2018, CFO Devinder Kumar said AMD had increased its research and development spending by 25% compared to the first half of 2017, to help support their product roadmap.

And, naturally, tariffs and the potential escalation of trade issues remains a wild card that could have an impact on electronics manufacturers. In last quarter’s report, execs didn’t express any concerns, so they might have a little more to say now that the situation has evolved. In addition to selling products directly into China, the company has had a joint venture there for several years that CEO Dr. Lisa Su said was primarily to gain market share in the region.

2018 Rally. AMD has had a sizable run over the past several years and it has continued to build on it in 2018. Even after the stock has dropped $9 since the start of September, shares are up 128.51% as of Oct. 24. Chart source: thinkorswim®by TD Ameritrade. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

AMD Options Trading Activity

One thing that’s worth noting is the stock was trading close to $16 when AMD last reported in July, whereas it’s trading around $25 heading into today’s report, a sizable jump in three months. So analysts and investors are likely to have high expectations for this afternoon’s results.

Around the upcoming earnings release, options traders have priced in a 12.7% ($3.20) stock move in either direction, according to the Market Maker Move indicator on the thinkorswim® platform. Implied volatility was at the 80th percentile as of this morning.

In short-term options trading at the Oct. 26 weekly expiration, calls have been active at the 25 and 26 strike prices, while there is a large amount of open interest all the way up to the 30-strike call, where the stock was trading at the start of the month. Volume has been lighter on the put side, with activity concentrated at the 25 strike.

At the Nov. 16 monthly expiration, again volume has been higher on the call side in recent trading. The 25, 26 and 27 strikes on the call side have all been heavily traded. For puts, a lot of the activity has been at the 25-strike put, right at the money.

Overall during yesterday’s session, traders were leaning toward the call side with a put/call ratio of 0.542.

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined price over a set period of time.

Probability analysis results from the Market Maker Move indicator are theoretical in nature, not guaranteed, and do not reflect any degree of certainty of an event occurring.

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